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Through speaking to investors we've established a primary concern when buying an investment property is finding one with a good ROI (Return On Investment) as after all, this is why they are investing in property in the first place, to make money. Calculating the rental yield is a great place to start.

What Is Rental Yield?

Rental yield is the annual rental income expressed as a percentage of the property value. The reason yield is used is so that you can compare different properties and investment scenarios.

For example, Bernie has money to invest in property and so trawls the portals for suitable options. He sees two properties he likes the look of; one on Sowood Street with an asking price of £139,950 and a potential rent of £695 pcm, and the other on Kirkstall Hill with an asking price of £169,950 and a potential rent of £895 pcm. So, which do you think has the higher yield? Put these figures in our Instant Online Yield Calculator to find out.

Although Sowood Street has a lower asking price, Kirkstall Hill offers a better ROI. It is important to note that yield can change over the duration of your investment, as house market conditions change.

Associated Costs

Estate Agents will sometimes publish yields in their property particulars, especially if the property is currently let and achieving a good rental income. But these are calculations based on the asking price alone as well as assuming the property will be fully let for the year. What they do not take into account are the additional costs associated with buying the property. So, when using the Yield Calculator it is also advisable to add the following associated costs onto the asking price of the property:

Stamp Duty Land Tax

Mortgage Fees

Conveyancing

Survey/Valuation

And then there are the ongoing running costs of owning the property which must also be considered. These may include Letting Agent Fees, Insurance, Maintenance, Furnishings and even running costs during void periods such as Council Tax.